Talk to an Intellectual Property Lawyer

A prospective or continuing employee and his or her employer
are usually in an unequal bargaining position—the employer generally has the
upper hand. Some employers have attempted to take advantage of their leverage
by requiring their employees to agree to very broadly worded assignments that
purport to transfer to the employer, in advance, ownership of everything the
employee creates, whether related to the job or not. In the words of one court,
these employers try to obtain “a mortgage on a man’s brain” (Aspinwall Mfg. Co.
v. Gill, 32 F. 697 (3d Cir. 1887)).

To protect employees, eight states, including California,
impose restrictions on the permissible scope of assignments of employee-created
inventions. These restrictions apply only to “inventions” an employee
creates—that is, items for which a patent is sought.

The California restrictions are typical. Under California
law, an employee cannot be required to assign any of his or her rights in an
invention he or she develops “entirely on his or her own time without using the
employer’s equipment, supplies, facilities, or trade secret information”
unless:

when the
invention was conceived or “reduced to practice” (actually created or a patent
application filed) it related to the employer’s business or actual or
“demonstrably anticipated” research or development, or

the
invention resulted from any work performed by the employee for the employer
(California Labor Code, § 2870).

As you can see, these limitations on employee invention
assignments are not very generous to employees. The only inventions an employee
can’t be required to assign to the employer are true independent
inventions—those that are developed completely without company resources and
that don’t relate to the employee’s work or the employer’s current business or
anticipated future business.

If you work in California, Illinois, Kansas, Minnesota or
Washington State, state law requires that you be given written notice of your
state’s restrictions on an employer’s right to obtain an assignment of employee
inventions. If this is not done, the assignment could be unenforceable.

What if you live in one of the 42 states that do not have
laws restricting invention assignments? Even in most of these states,
pre-invention assignments can’t be grossly unfair. Because
they want their pre-invention assignment agreements to be legally enforceable,
employers in these states sometimes track the rules used in the other eight
states when drafting assignments.

Invention Assignment Restrictions Inapplicable to
Contractors

None of the state law limitations on invention assignments
discussed above apply to independent contractors, they only apply to employees.
So, even if you live in a state like California that has such a law, companies
that hire you as an independent contractor have more latitude in how they word
their assignment agreements. Even so, a court might hold an unconscionable or
fraudulently obtained assignment invalid, just as if you were an employee. If you don’t sign an assignment or it’s found invalid, the default
rules discussed in this article would normally apply.

Is your agreement enforceable?

Courts sometimes find pre-invention assignments to be
legally invalid. If a court finds your assignment to be invalid, it won’t
enforce it and you’ll retain ownership of your invention. A pre-invention
assignment you signed might be unenforceable if:

The
assignment is unconscionable: Courts generally will refuse to enforce
assignments that are grossly unfair to the employee. The courts call such
agreements unconscionable—that is, so unfair that enforcing them goes against
public policy. For example, an assignment that said your employer owned any
inventions you created while employed, even if they don’t relate to the
employer’s present or anticipated business and were created by you on your own
time without the employer’s resources, would likely be found unconscionable by
your state courts.

The
assignment was procured by fraud: An assignment may be unenforceable if it was
procured by fraud—for example, your employer lied or tricked you into signing
it.

You signed
the assignment after you were hired: All legal agreements, including invention
assignments, must be supported by something lawyers call “consideration”—that
is, each party must receive something of value for signing the agreement. If
consideration is lacking, the agreement won’t be legally binding. If you sign a
pre-invention assignment before you start work, there is no problem with
consideration: The salary you will be paid is deemed to be consideration for
signing the agreement. However, some employers forget to get employees to sign
an assignment when they are first hired. Often, such employers will later
realize their mistake and require the employee to sign an assignment long after
being hired. Courts in some states have held that if the employer doesn’t give
the continuing employee something of value in exchange for signing such an
“afterthought” assignment—for example, a raise, stock option, extra
vacation—the assignment lacks consideration and is therefore unenforceable.

The employer
waited too long to enforce the assignment: A court may decide not to enforce
the agreement if your employer waited so long that it would be unfair to
enforce it against you. This is most likely to occur where the delay made you
think your employer had no ownership claims and you acted accordingly. For
example, a court may decide not to enforce an assignment against an employee
who left the company five years previously and patented and licensed the
invention, thinking that he owned it.

If you think any of these grounds might apply in your case,
you should consult with an intellectual property attorney. Ideally, you would
do this before you conceive an invention; but this is often not possible. After
all, one never knows when inspiration or “the flash of genius” will strike.